Bill Gunderson

Some readers might remember a few years ago, I said: Sell everything under the sun – talking about solar stocks.

At the time, First Solar was in the middle of a dive bomb from record highs to record lows. A lot of people, myself included, did quite well with that bit of advice, thank you.

That was then. This is now: Solar stocks have had a terrific year. So as 2013 comes to a close, a lot of people want to know: is it time to get back in?

Let’s see: We’ll use First Solar (FSLR) as a proxy because it remains the biggest solar stock by market cap.

Data from Best Stocks Now App

Headquartered in Phoenix, AZ, FSLR is a $5.9 billion company. The story starts in 2008 when FSLR was a $317/share company. Shortly thereafter I warned everyone to put on some sunscreen and run for shade from FSLR!

It finally landed last year at $11/share. Today it’s back at $60/share. FSLR has been a big winner over the past 12 months.

But the people who talk about how well the solar stocks are doing seem to leave out FSLR’s history beyond a year. From $317 down to $11 and back to $60.

I could make the argument that this stock has simply dropped from $317 to $60, down 250 points over the last five years. (Oops, I just did.) Let’s not forget that. But other momentum investors would say they don’t care about anything besides 2013. And they love solar: It’s the future!

My Best Stocks Now! app is an equal opportunity investor. It has no opinion on whether solar, wind, or oil, etc. is the future. All it does is look at the short-term, intermediate, and long-term performance, as well as the valuation and stock chart. So let’s do that.

Performance

I know FSLR has had a terrific 12 months, but what about the last 60? We can’t just put on our blacked-out, oversized sunglasses and ignore them. We still need to be able to look at, clearly, this period of time in FSLR’s history.

Data from Best Stocks Now App

Over the last five years FSLR has been going down by 14% per year while the market has been going up by 15%. How about the last three years? FSLR has been going down by 21% per year while the market has been going up by 15% per year.

But anyone can change. Let’s look at the last 12 months. The stock is up 121%. The market is only up 28%. So FSLR win’s the final round. But this isn’t a one-round fight. So next we have to look to the future of FSLR. And how do we do that? We look at valuation.

Valuation

FSLR is expected to earn $3.40 per share next year. This gives the company a reasonable PE of 17.6. But here’s the rub—the growth rate is expected to drop by 10% per year.

Data from Best Stocks Now App

Here is a company whose earnings are going the wrong way. FSLR is not growing up 15-20% per year as Best Stocks Now! require, it is contracting by 10%!

Stock Chart

The stock chart doesn’t look terrible.

But when I take off my oversized, blacked-out sunglasses and look at the big picture of FSLR, I remain on the bear side of this debate.

Data from Best Stocks Now App

One year does not a trend or stock make. In fact FSLR comes in at #1,045 out of the 3,732 stocks in my database. Lots of people buy solar stocks for the reasons besides making money. Bragging, for example.

But as for me and FSLR, I’ll pass. There are too many good stocks out there to waste our time on hoping that something that has been so dark for so long will finally see the light.

Data from Best Stocks Now App

Please follow me on Twitter or at my website for a change in opinion of the stock or for information on my management services.


Bill Gunderson

Bill Gunderson is the CEO and Chief Market Strategist of Gunderson Capital Managment in San Diego, CA. He is also a professional money manager, former research analyst, author of Best Stocks Now. http://www.pwstreet.com